To secure a loan, having a good credit history is a must. It lets the lender know that you have both – the willingness to repay the loan and the financial capability to do so. Hence, it is obvious that lenders almost always approve loans for individuals with a good credit rating. But what if you have a bad credit history?
Well, in that case, most lenders will not offer you loans. And even if they agree, they will require a guarantor to back your loan or charge you a higher interest rate! This can be a tricky situation.
If you do not have someone willing to take the financial guarantee on your behalf, you can opt for no guarantor loans. As the name indicates, such loans do not need a guarantor to sign off the loan application, nor do they require any asset to be pledged.
All you need to do is offer proof of your income, indicating that you can make the repayments in time. If the lender is satisfied with the same, they will approve your loan application.
Points to Remember
As easy and convenient as a no-guarantor loan sounds, certain aspects need your consideration before you leap. These include –
· No guarantor loans are offered at a higher rate of interest since the risk proposition for the lender is relatively high.
· These loans prove to be rather expensive. Hence, you must carefully calculate the amount that you need to request.
· No guarantor loans are offered on your current ability to pay. Therefore, it is crucial that you can give proof of income that substantiates your ability to repay the sum in time.
· Sometimes, the lender will need to know what you will be using the funds for. Hence, you should be prepared with a valid answer if such a question comes up.
· Due to the higher risk involved, most lenders offer a smaller sum of money as no guarantor loans. As you keep repaying on time, your borrowing limit might increase for subsequent loans.
· If you fail to repay the loan promptly or in full, you can face serious financial trouble. Your credit score will receive a severe blow, and you may not be eligible for any loans in the future.
· In case of delayed or no repayment towards a no-guarantor loan, the lender is more likely to send a CCJ to you. This will further harm your financial standing.
We hope that you now have a better understanding of no-guarantor loans. While we want you to understand the issues related to this loan fully, we do not want to discourage you from getting it. After all, even a relatively small loan of £1000 to £3000 can get you out of your current financial troubles and help you make your way toward a more secure future.